Spending watchdog to examine scrapping of £1bn carbon capture plan

The National Audit Office is to investigate George Osborne's decision to scrap a £1bn prototype carbon capture scheme which cost the taxpayer at least £60m, a letter seen by the Guardian shows.

National Audit Office to investigate taxpayer value for money in George Osborne’s scrapping of CCS and question plans to secure UK energy supply

The spending watchdog said it would be looking into the expenses incurred in running, and then prematurely halting, a CCS auction. It will also examine how the Department of Energy and Climate Change (Decc) plans to secure the country’s future energy needs.

“In the coming weeks we will begin work looking at particular areas: the costs that government has incurred in running the competition; and the department’s understanding of how the decision to cancel the competition impacts on its aims to maintain security of supply and reduce emissions,” writes Sir Amyas Morse, the auditor general at the NAO.

Lisa Nandy, the shadow energy and climate change secretary who originally called for an investigation, said she hoped a light could now be shone on Osborne’s decision, taken in last November’s autumn statement.

“The chancellor’s sudden decision to abandon support for this cutting-edge technology after 10 years of promises hasn’t just damaged investor confidence at a time when we desperately need investment in our energy sector. It also means that millions and millions of pounds of taxpayers’ money has been simply wasted,” she said.

“The costs to families and businesses of his short-sighted decision could yet be bigger still because without CCS it will be more expensive to cut emissions. This NAO probe should uncover the full cost to the taxpayer of George Osborne’s broken promise.”

Ministers have also admitted that £222m of public money has been spent overall on carbon, capture and storage (CCS) but they have still not decided what, if any, role it will play.

CCS is a system in which CO2 from a coal- or gas-fired power station can be removed and stored, most likely within an old North Sea oilfield. Carbon is one of the greenhouse gases held responsible for global warming.

The CCS auctions were meant to open the way for an eventual winning consortium to build a prototype that would pave the way for others to follow with commercial schemes.

Shell was developing a trial scheme at Peterhead in Scotland alongside one of the big six energy suppliers and power station owner SSE. A separate White Rose project was being developed by Drax at its coal-fired plant in Selby, North Yorkshire.

Decc said the latest government spending cuts meant difficult decisions had to be made.

“We did not take this decision lightly and it remains the case that CCS has a potential role in the long-term decarbonisation of the UK. We want to make our energy supply as clean as possible, but we will do so in a way that keeps bills as low as possible,” said a Decc spokeswoman.

Energy and climate change minister Andrea Leadsom admitted in response to a parliamentary question from Labour last week that £31m of taxpayer’s money had been spent on White Rose and £28m at Peterhead.

There was no breakdown as to where this money went but Leadsom said £222m had been spent overall since 2011. She also said CCS had not necessarily been ditched completely.

“The government continues to view CCS as having a potential role in the long-term decarbonisation of the UK’s power and industrial sectors,” she added.

The Committee on Climate Change, an independent body which advises the government, wrote on Thursday to Amber Rudd, the energy and climate change secretary, saying the costs of meeting Britain’s agreed carbon targets would double without CCS.

Labour has amended an energy bill currently making its way through the House of Commons requiring Rudd to bring forward a new CCS strategy within the next 12 months.